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The real influence of the DIY phenomenon

My instinct is to say, while both are definitely worth paying attention to, they are being over-hyped. So for all of you out there currently selling, installing and servicing security systems, here is where I am at on these recent phenomena:

1. When companies like Google, Amazon and Samsung all buy companies tangentially involved in the security field, we all should pay attention. Try to find out what the customers who buy their products are looking for and whether they are satis ed with what they have got. Frankly, I am not sure anyone knows where these big companies want to go in this field. But they are so big that if they decide to truly enter the intrusion  eld with a monitored solution, it could have a huge effect.

2. We know that more and more MSOs (cable and telcos) are entering the security industry and pushing many of the items in the connected home in their offerings. They are not using equipment from the big boys above. I think this is driven mostly by not wanting anybody else to have access to that home, including Google and Amazon. The MSOs — in Canada currently this would be Rogers, Telus, Bell, SecurTek and Eastlink — will certainly take their share of market in the short term. But with the exception of Comcast in the U.S., I am not sure the MSOs’ security initiatives have been all that successful. Certainly offering connected home devices is not going to determine their success. It is more likely to be running their program on a model that works financially, i.e. paying sensible multiples for new accounts, managing their cost to create new accounts carefully and achieving good attrition numbers. These will be far more important.

3. I have heard that smaller dealers who are exposed to all this chatter about the need to offer the “connected home” have concluded that it is all too much for them and are getting out. That might be too drastic. Instead, do what most dealers are doing and offer interactive panels for those who want them.

4. There are new businesses springing up across Canada offering interactive panels that can control the customer’s cameras, lights, doors and heat. I can see that this “complete” system will appeal to those who want the convenience they offer, but they have to be able to afford them. Whether these new companies can make a long term go of it remains to be seen.

5. In terms of market penetration, how much DIY and the connected home will increase the market penetration of monitored security systems is undetermined. I think DIY and MIY (Monitor It Yourself) will grab their share of what we might broadly define as the security market. There is a concern that the DIY systems you see at Best Buy will peel off some customers who might have otherwise bought a professionally installed system. Let’s face it: some people simply do not think they need monitoring. A system that sounds an alarm and/or notifies them on their phone is enough. As these DIY systems improve their equipment, I believe they will take more market share.

6. As for the connected systems that are selling for upwards of $60/month for monitoring, I worry that this pricepoint is not sustainable once the first five-year contract expires.

7. Instead of obsessing about DIY and connected home devices, based on conversations I have had with some dealers today, the most important option to offer is the ability to connect to the cell network through either something like Total Connect or Alarm.com. This covers you should the customer drop their landline (many times without telling you) which thousands are doing and at the same time allows you to add interactive devices in the future. It stands to reason that accounts with this built into their systems will hold their value better than those without.

8. Finally, and most importantly for all of us, I am closely monitoring the value of those alarm accounts that don’t offer cell or interactive technology versus those that do. So far I am surprised I have not seen any serious deterioration in the selling price of old technology accounts where I think there should be. Why would anybody today pay 35X for a panel which can’t even detect whether the system is still being monitored or not or cannot allow for interactive use or the controlling of locks and cameras in the future? On top, some telcos right now are paying much more than 35X for old technology accounts when they know they are going to have to sink more money into the account to upgrade after.

I would argue that we all should be paying attention to DIY and the connected home, adjust our business models a little to adapt, but for the time being, aside from making sure you incorporate cell technology into as many accounts as possible, don’t panic.

Victor Harding is the principal of Harding Security Services (victor@hardingsecurity.ca).

This article originally appeared in the June/July 2018 issue of SP&T News.